IRS Releases New Employee Retention Tax Credit Guidance
Mar 28, 2025
Wait, we’re talking about the Employee Retention Tax Credit (ERC) yet again? Yes, you read it right, after hearing very little on the topic for the past 18 months, ERC is back in the news. On March 20, 2025, the IRS released new Employee Retention Tax Credit Guidance in an updated FAQ.
Specifically, the IRS introduced a new section entitled “Income Tax & ERC,” that addresses, one, situations where taxpayers didn’t reduce their claimed wage expense but received the ERC, and two, situations where taxpayers did reduce wage expenses but had a disallowed ERC claim. The tax authority also expanded guidance on reporting ERC fraud.
Here is what you need to know:
Income Tax & ERC
- The IRS stands by its original position that taxpayers should have reduced their deductible wage expense by the amount of allowed ERC in the tax year the qualified wages were paid or incurred. However, the IRS is now providing alternative solutions for claiming unreduced wages. Under the revised guidelines, taxpayers now have the option to report the overstated wage expense as gross income in the tax year when the Employee Retention Credit was received, rather than amending their previous returns. This marks a shift from the earlier policy.
- The updated FAQ also addresses scenarios where an ERC claim was denied after a taxpayer had already reduced their wage expenses for the year in which the qualified wages were paid. In these cases, taxpayers can now adjust their current return to reflect the increased wage expense corresponding to the disallowed ERC, instead of filing an amended tax return, an AAR, or a protective claim for refund for the earlier tax year. It’s important to note that taxpayers may still opt to amend previous returns to recapture the previously reduced wages.
ERC Scams
- The IRS has issued further guidance on the procedures for reporting ERC-related fraud, strongly urging taxpayers to report any suspicious activities, including illegal, tax-related activities involving ERC claims, individuals who promote improper and abusive tax schemes, and tax return preparers who deliberately prepare improper returns. The step-by-step process for reporting ERC fraud can be found in the “ERC Scam” section of the FAQ.
To read the full FAQ along with the updated guidance, please refer to the IRS website here. To better understand how this new guidance may impact your business, we encourage you to connect with our Employee Retention Tax Credit (ERC) lead, Mike Hanf.
Mike Hanf, Tax Partner – mike.hanf@wvco.com
Categories: Tax Compliance
Before the Deal: An Introduction to Due Diligence
Mar 24, 2025
Understanding Buy-Side and Sell-Side Due Diligence
Buying or selling a business is a highly intricate process that requires strategic foresight and rigorous analysis. Whether operating on the buy-side or sell-side, conducting comprehensive due diligence is the cornerstone of deal success, mitigating exposure to financial, operational, and legal risks.
What is due diligence?
Due diligence is an investigative process designed to validate and assess all material aspects of a potential transaction. It involves a deep dive into financial, legal, operational, technological, and commercial factors to ensure a well-informed decision-making process. Due diligence highlights considerations by providing an investigative lens that ultimately protects the buyer and the seller from potential pitfalls, safeguarding against unforeseen liabilities and value erosion.
Basics of Buy-Side Due Diligence
On the buy-side of a transaction, ensuring that a potential target is a solid investment and aligns with your business’s overarching goals is paramount. Therefore, the primary focus of buy-side due diligence is to verify the accuracy and integrity of the seller’s financial disclosures while identifying potential red flags. Key areas of review include:
- Quality of Earnings (QoE): Assessing revenue sustainability, EBITDA adjustments, and non-recurring expenses to gauge true earnings power.
- Cash Flow Analysis: Examining historical and projected free cash flow to ensure liquidity adequacy and debt serviceability.
- Balance Sheet Strength: Evaluating working capital efficiency, asset quality, contingent liabilities, and off-balance sheet exposures.
- Legal & Compliance Risks: Identifying potential litigation, contractual obligations, and regulatory concerns that could impact post-transaction integration.
While audited financial statements provide a fundamental baseline, they often fail to capture operational synergies, market positioning, and cultural fit – making an integrated due diligence approach essential.
Basics of Sell-Side Due Diligence
For sellers, a proactive due diligence strategy enhances deal certainty and strengthens negotiating leverage. The goal is to preemptively identify and address areas of concern that could derail valuation or delay closing. Sell-side due diligence entails:
- Financial Statement Readiness: Ensuring GAAP/IFRS compliance, reconciling discrepancies, and preparing robust financial models to withstand buyer scrutiny.
- Legal and Regulatory Preparedness: Resolving outstanding liabilities, clarifying ownership structures, and securing necessary approvals to expedite deal execution.
- Commercial Positioning: Validating customer contracts, market share stability, and competitive differentiation to justify premium valuations.
By conducting due diligence preemptively, sellers can bolster buyer confidence, minimize post-LOI renegotiations, and drive a more efficient closing timeline.
Making Informed Decisions
Regardless of deal positioning, due diligence is a critical component of transactional success. Whether assessing an acquisition target or preparing for a liquidity event, the process is inherently resource-intensive and demands meticulous planning. Engaging a third-party advisory firm can provide an independent, data-driven perspective, enhance deal certainty, and optimize transaction outcomes.
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Patrick Mannion, Managing Director
Transaction Advisory Service
spatrick.mannion@wvco.com
Categories: M&A
Social Security Retroactive Payments: What You Need To Know
Mar 07, 2025
In January, President Biden signed into law the Social Security Fairness Act, significantly increasing benefits for nearly 3 million former public employees in the United States through Social Security retroactive payments.
This week the Social Security Administration (SSA) announced that back payments have been sent to over 1.1 million beneficiaries. These payments reflect the retroactive benefits owed to retirees, spouses, and surviving spouses due to the elimination of the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP).
How This May Impact You:
- Retroactive Payments: As of March 4, over $7.5 billion in retroactive payments have been distributed to 1,127,723 individuals.
- Monthly Increases: Starting in April, beneficiaries will notice an increase in their monthly payments, corresponding to higher benefits for March.
Next Steps:
Beneficiaries can visit SSA’s dedicated website to learn more about the Fairness Act and see updates on the agency’s progress. The SSA is expected to release more details soon.
For any assistance or further inquiries regarding the Social Security retroactive payments, please do not hesitate to contact our team. We are here to help you navigate these changes and understand how they impact your benefits.
Categories: Other Resources
UPDATED 3/3/205 – BOI Reporting Reinstated: Latest Legal Developments
Feb 20, 2025
UPDATE 3/3/2025: FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines, read FINCEN’s release here!
On Monday, February 17, a federal district court judge in Texas lifted the suspension on the Corporate Transparency Act, reinstating the requirement to report beneficial ownership information.
In a recent announcement from the Financial Crimes Enforcement Network (FinCEN), the deadline for most companies to submit their reports has been extended to 30 calendar days from February 19, 2025, setting the new due date to March 21, 2025.
FinCEN also mentioned plans to review the beneficial ownership information reporting requirements under the Corporate Transparency Act. This review aims to reduce the reporting burden on low-risk entities while focusing enforcement efforts on threats that pose significant risks to U.S. national security. The criteria for identifying low-risk companies remain unclear, but this evaluation will occur over the next 30 days.
For general details on BOI Reporting being reinstated, please visit William Vaughan Company’s BOI Insights & Resource Hub. For comprehensive guidance, we encourage you to visit FINCEN’s website.
Categories: Tax Compliance
President Biden Signs Into Law the Social Security Fairness Act
Jan 06, 2025
Law to boost social security payments for millions of public workers
On Sunday, President Biden signed the Social Security Fairness Act into law, significantly increasing Social Security benefits for nearly 3 million former public employees in the United States. This landmark legislation repeals two significant federal policies—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These policies previously prevented teachers, firefighters, police officers, and other government workers with pensions from jobs that didn’t contribute to Social Security from receiving full Social Security benefits. They also reduced benefits for those workers’ spouses and surviving family members. The repeal marks a meaningful step toward greater financial security for these individuals and their families.
What does this mean for you?
If you worked in a public sector position, you might qualify for higher Social Security benefits based on your work and pension history. Additionally, if you’re a spouse or survivor, your benefits could increase.
The enhanced benefits introduced by the Social Security Fairness Act would apply retroactively to December 2023. This means that payments for eligible individuals are expected to be backdated to January 2024.
Next steps?
The Social Security Administration is expected to release additional details about the implementation soon. We encourage you to stay informed by visiting their official page: https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html
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Categories: Other Resources